“Resilience and flexibility” key at current time, says Woodbois Ltd22 April 2020
African sawmilling and veneer business WoodBois Ltd has reported a 10% increase in Q1 revenue to US$4.9m.
The UK-based company, listed on the AIM section of the London Stock Exchange, has also recommenced operations in Mozambique after more than two years. Additionally, it is enacting resilience plans in response to COVID-19 and Gabon activities have been temporarily halted as the country enters COVID-19 lockdown.
“Whether economies emerge from this pandemic with a slow recovery or with stimulus-driven strong rebounds, demand for sustainably sourced tropical timber as a construction material across the globe is expected and Woodbois will be positioned to deliver,” said CEO Paul Dola.
“Resilience and flexibility are integral within the Woodbois psyche and culture, and at challenging times like these, organisations and individuals with such characteristics differentiate themselves. While paying close attention to our working capital requirements in the months ahead, we will do everything in our power to support our staff, our suppliers and our customers to ensure that we emerge from this difficult period stronger and more united."
Woodbois said demand for its hardwood lumber and veneer products only tailed off at the end of Q1 due to the global impact of COVID-19. Trading activity to-date in April remains limited, although enquiries from Asia have been increasing as lockdowns are relaxed.
The first full quarter of production at the newly re-tooled sawmill in Gabon saw production increase by more than 100% over the previous quarter, with recovery levels of 40%, up from an average of 34% for 2019. Revenues from production are typically captured upon shipment in the following quarter while higher levels of recovery are a direct driver of margin increase.
At the end of March, a new Mebor sawmill line arrived from Slovenia. This new line will be assembled and tested as soon as travel restrictions into Gabon are relaxed.
“The additional capacity from this new line, in addition to the new equipment that recently became operational will enable us to provide higher volumes of premium quality sawn timber to our customers as soon as demand recovers,” the company said.
In March, Woodbois announced the signing of a management agreement with Future Earth II LLC – a US company with substantial concessions in Mozambique, creating a relationship under which Future Earth will fund, manage and operate Woodbois' Mozambique concessions, employees and equipment, in order to produce sawn lumber and veneers to be sold by Future Earth on a profit share basis.
The Woodbois concessions in Mozambique have been on a care and maintenance basis for over two years, partly due to an industry export ban in 2018 and due to the quantum of investment required to restart and to enlarge the operations to be able to earn an acceptable return on capital comparable to the Group's other business segments.
The agreement with Future Earth Management provides material benefits to both parties, not least from the economies of scale arising from Woodbois' approximately 300,000 hectares and Future Earth's approximately 620,000 hectares of concessions.